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JUSTIFYING JUST CAUSE
HOW EMPLOYERS CAN MITIGATE THE RISKS ASSOCIATED WITH
TERMINATIONS FOR CAUSE
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A recent decision by the Ontario
Superior Court of Justice
(ONSC) serves to remind employers
of the serious – and
expensive – risks associated with alleging
just cause for termination without a reasonable
basis for doing so.
Employee misconduct must typically
be egregious in order for it to constitute
just cause for dismissal. It’s therefore rare
that just cause for termination will exist.
However, in efforts to circumvent their
reasonable notice obligations when dismissing
employees, some employers will
allege just cause when it is clear that just
cause does not truly exist. This manner
of attempting to reduce the (often high)
financial cost of terminations has, however,
been increasingly backfiring for those
employers.
When an employer improperly alleges
just cause for termination, the employee
may commence wrongful dismissal litigation
against the employer. In the event
that a court agrees that there was no just
cause, the court will award damages, either
for reasonable notice or pursuant to an
enforceable termination clause in the employment
contract. However, courts may
also award additional damages – generally
called extraordinary damages – in these
cases if they find that the employer acted
unfairly or dishonestly in alleging just
cause when the employer knew or ought to
have known that it did not exist.
The ONSC’s September 2015 ruling
in Gordon v. Altus (“Altus”) is the latest
in a series of decisions across Canada in
which courts have awarded substantial
extraordinary damages awards against
employers that alleged just cause without
justification.
THE FACTS IN ALTUS
In Altus, the plaintiff, Alan Gordon,
sold his business to the defendant, Altus
Group Ltd. (the “Company”), for several
million dollars in 2008. The purchase
price was subject to an adjustment in 2010
based on the Company’s performance after
the sale. Following the 2008 sale, Gordon
was hired by the Company on a three-year,
fixed-term employment contract.
In early 2010, the Company advised
Gordon that the purchase price would
be reduced based on its calculations
of the Company’s performance since it
purchased Gordon’s business. Gordon disagreed
and advised the Company that he
would trigger the arbitration clause in the
purchase and sale agreement in order for
an independent arbitrator to determine
any adjustment to the price of Gordon’s
business.
The dispute over the purchase price of
Gordon’s business strained the parties’ relationship.
The Company suddenly began
alleging that Gordon had committed various
types of misconduct, then terminated
Gordon’s employment in March 2010, allegedly
for cause and therefore without
notice or further payment.
By Joel Smith
Continued on page 17
HRPATODAY.CA ❚ JANUARY 2016 ❚ 15
